Timeline of financial distress table

Informal Turnaround Processes (outside of the legal framework provided by the Companies Act and Insolvency Act)

Formal Legal Processes

Chapter 6 of the Companies Act No. 71 of 2008

Insolvency Act

Emerging problems

Acute and worsening problems

In financial distress but economically viable

In financial distress and not economically viable

Management-led correction

Informal creditor workout

Business rescue

Liquidation

Turnaround in the absence of creditor pressure.

There is no creditor pressure since the financial situation is not yet critical.

Turnaround when the financial situation is already critical, but in the absence of creditor pressure.

This is due to support from benevolent shareholders. e.g. distressed government organisations, SOEs and companies with financial support from holding companies.

Turnaround given an informal agreement, between management and creditors to reduce indebtedness.

Creditors are normally banks and institutional lenders.

Management remains in charge, but the agenda is determined by the workout agreement.

Turnaround characterised by the temporary supervision of the management of the company, a temporary moratorium on the rights of claimants against the company, post-commencement finance, cram-down of dissenting creditors, and a business rescue plan.